In reply to STM317 :
Definitely.
In reply to STM317 :
Definitely.
I can't really read those graphs because phone, but is that Profit or Profit Margin in the top graph?
Profit (raw dollars) is meaningless no matter how large or small.
Profit Margin (percentage of revenue) is all that counts. And even that is tempered by length of time it takes to reap that profit (Return On Investment).
Also, is that 1300% up over a disastrous year, or a typical one?
In reply to STM317 :
What are their profit margins? When the fed has dumped trillions of dollars in the market and driven inflation through the roof, it's easy to say the corporations are making money hand over fist, but what are their margins? As their gross goes up, their nets should track by about the same percentage.
I'm up over 30% for the year. My margins haven't changed but my dollars of profit have gone up. While some of that has passed on down the line, a lot of it is going into savings. I am stacking up cash to tide me over the E36 M3 storm I think is on the horizon though. My employees aren't going to give me the money so I have to make sure I have enough to keep all of us paid through the thin times. Just like I did through 2008 and COVID.
For those curious about profit margin rather than raw profit, I believe this is the way The Fed tracks it:
Q1 1980 was not specifically chosen for any reason other than it was basically the farthest back that would still cover all of the data sets. Weekly pay wasn't tracked until just prior to 1980.
So if we do the same thing for margins, and compare Q1 1980 to now, we see that profit margins have risen 511%
52 years ago Freidman published "The Business of Business" which suggested that shareholder returns should be the highest priority of a business. In the last 42 years:
Total profits are up 1263%
Profit margins are up 511%
Productivity is up 113%
Weekly earnings are up 12%
I don't think that's a coincidence.
In reply to STM317 :
I reading a little further into some of those.
I noticed how they calculate the labor productivity:
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.
Seems odd. It includes the proprietors (owners). And I have no idea what it means to include unpaid family workers.
What is productivity? Is it the GDP? Dollars produced? Or is it the actual number of widgets that come off an assembly line?
What is productivity to a tech company? What the machine spits out in hours? Dollars?
What is productivity to a financial company? The ratio of number of hours worked vs dollars created?
I'm honesty interested. Seems messy.
In reply to STM317 :
Your chart is billions of dollars, not percentages.
This, from Bloomberg says margins are within a few points of where they have been since the 1950s.
Currently about 13%. I usually shoot for a good bit more than that.
In 1980, very few of the most profitable tech companies were in existence. Google, Amazon, FaceBook didn't exist. Apple existed, but was only 4 years old and still making unpopular goofy desktops in Steve Jobs' garage.
It's not a surprise to me that both profits and margins have grown exponentially with the changes in technology. If they hadn't, I'd say something was seriously wrong.
I think that window should be shortened a lot to have any meaning.
SV reX said:In reply to STM317 :
I reading a little further into some of those.
I noticed how they calculate the labor productivity:
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.
Seems odd. It includes the proprietors (owners). And I have no idea what it means to include unpaid family workers.
What is productivity? Is it the GDP? Dollars produced? Or is it the actual number of widgets that come off an assembly line?
What is productivity to a tech company? What the machine spits out in hours? Dollars?
What is productivity to a financial company? The ratio of number of hours worked vs dollars created?
I'm honesty interested. Seems messy.
You (or anybody else that's interested) can see the entire data sets in the charts that I posted. I specifically avoided narrowing the data sets to avoid steering any possible conclusions and allow anybody that sees them to be able to see how current times might relate to years past. If you want to view different windows of time or do calculations for different time periods, that's pretty easy on the FRED website. Just google the heading of each chart and "FRED" and have at it. There's a slider bar at the bottom of each chart that you can use to zoom in/out on a specific year range.
In reply to STM317 :
In the last 42 years, a very major change is that a significant percentage of work is now performed by machines, computers, and automation.
It completely makes sense to me that profits and productivity would be up, and earnings would not. It's what we "wanted". Less work is being performed by humans (less hours worked, more stuff made).
I don't know how that could be balanced in a way that actually reflects worker labor as it relates to earnings.
That seems like a success story, not a failure. We are actually achieving the always desired goal of more money for less work.
Toyman! said:In reply to STM317 :
Your chart is billions of dollars, not percentages.
This, from Bloomberg says margins are within a few points of where they have been since the 1950s.
Currently about 13%. I usually shoot for a good bit more than that.
The FRED chart that I shared on this page shows profit margin in dollars. So .06 dollars of margin is 6%, etc.
The first data set you shared only goes through 2014 as far as I can tell. Something more up to date would provide a clearer picture of the current situation. For what it's worth, the FRED chart I shared on this page shows 10% margins in Q1 2014, and 16.5% in Q2 2022. That jump represents a 65% increase since 2014.
The second chart that you shared shows an increase from ~6% profit margins to ~12% in just the last 12 years. That alone is a 100% gain.
In reply to STM317 :
OK, I'm still not seeing what your problem is. Are you actually complaining that a business makes 16% return on investment?
In reply to Toyman! :
I'm not sure I'm complaining. There was a discussion on the previous page about how American society's view of work seems to be changing for the worse. I was just trying to provide some data to show why that outlook may be increasing in popularity.
Personally, I don't begrudge an individual business for making 16% profit, but I think it's an issue when the median for all corporations is that high.
I'd like to borrow your Bloomberg chart from before:
The shaded areas are recessions. It seems like recessions tend to have margins in the 6% range. That's clearly not healthy. But anytime that we see margins greater than ~10% a recession follows shortly thereafter as it's not sustainable for consumers. So I'd say that a healthy average margin for corporations overall is probably in the 8-10% range. 15% seems likely to break stuff and cause pain long term.
And the spike in profit margins over the last couple of years specifically seems to be labeled by many as "inflation" when a fair bit of it is profiteering. Maybe they're just trying to stack cash to survive a downturn like you are (genuine respect for the way that you seem to treat your workers by the way) but that seems unlikely knowing what we do about corporations and their motivations and previous actions during downturns. The idea that these large corporations are simply doing their best to barely scrape by in hard times rings a bit hollow when they're not only raking in larger total profits, but also higher margins than ever before. If they truly have found ways to operate more profitably in this time of supply chain disruption, worker shortages, and high inflation then more power to them. But I'm skeptical that's what is actually happening in most cases. The easier conclusion is that padding corporate profits is a significant factor for the inflation we're all dealing with.
In reply to STM317 :
Of the top 10 most profitable companies, 5 of them are tech companies. 3 are banking. WalMart and J&J (healthcare) are the other 2.
All 10 were in the position to advance their margins and profits dramatically during the pandemic. More goods and services being sold with fewer staff and facilities.
I've gotta think that the top 10 most profitable companies skyrocketing would have an impact on the averages.
Profiteering? Perhaps. But every one of us wanted to stay home and buy goods and services online.
You are all missing the point- there are complaints about the economy structure, and that people don't want to work- does it really matter if it's profit margin or profits when actual take home pay for people is not increasing anywhere near that? In the same time frame that worker wages went up 12%, CEO take home went up over 900%.
The point being that people are honestly asking themselves who are they working for- themselves and their families or other people? And when given the choice between being on call 24/7 vs. a hard 8 hour work day- people are really asking what they really want out of working.
The COVID relief ended 2 years ago- this isn't a COVID specific problem for workers, it's a self question during the time they didn't work to ask what they really want out of life. And it seems that working outside for 8-10 hours a day is not as common as it used to be.
Maybe that will change soon, and maybe we get new workers to get new housing.
The actual numbers don't matter at all- what does matter is that people see a long standing separation between their compensation and the people who just tell them what to do. And that normally, when one of those people make a bad decision, the worker is the one on the short end of the stick. The numbers just point that out.
I remember when Delta went into bankruptcy court, and there was a challenge to allow the top management in the company to retain their pay when the unions were told they would get their pay cut. The top management got to keep their income at the expense of the unions (and these include the pilots unions)- and it was the top management that drove the company INTO the courts.
The trend to "quiet quit" is real, and it's going to last a long time.
In reply to alfadriver :
This but choosing yourself and your sanity over an employers needs etc is frowned upon and "Millenials and gen-z blah blah blah something negative". We are having a similar issue in the military with retention issues and folks not seeing the value in non-value added activities, spending all while sacrificing your body, brain, family time and life for what end result?. But 55-60 year old Generals cant relate because when they were LT's and Capts blah blah blah something out of touch.
Not directly related to real estate, but continuing down this path of conversation:
In 2018, I worked my ass off. Exceeds Expectations. Got a 2% raise.
In 2019, I worked my ass off. Hit my numbers within 0.04% - and this meant that the company underspent their capital target by less than $200K off of a budget of $500M. I got a E36 M3 rating and didn't get a raise.
In 2020, I worked my ass off at home. No raises for my department. Met expectations, but what did it matter?
In 2021, I didn't work my ass off. I did what I needed to do, I improved my tools, I did the work, but I didn't go looking for ways to distinguish myself. I had 4 managers throughout the year. My last manager lied to me, told me I was getting Exceeds Expectations, then he left the company on Dec 31 and didn't do my review. I had no feedback from anyone and got a Needs Improvement rating.
In 2022, I've been doing the bare minimum. 3 managers so far. Not really getting rewarded at all. I see no reason to do more than what the bare minimum is.
Every single year, our President, CFO, CEO, COO, CIO, etc., are making enough for me to retire on. In a single year. And I'm getting E36 M3 on. Been looking for a new job, but the one thing I get here are good benefits.
Meanwhile, I am thriving in my side gig. Putting in 10-20 hours a week, loving it, would do more if not for the "real" job and the fact that family is more important than money.
It isn't about work ethic. It is about not being taken advantage of.
In reply to yupididit :
Making it generational has always been vouge.
Lest we forget, Samuel Clemens wrote a good story that contained the idea of it being honorable to be taken advantage of. He was clearly mocking that happening.
In terms of the subject- I actually wonder how much of the crisis can be traced to red lining? Lots of Detroit was not available to minorities up until 1968 or so- and when people left Detroit, many homes were left to rent instead of being sold. Now, there's a huge amount of renters in Detroit- where the people staying there have zero incentive to make the property better, and then they pay higher rent. Even the recent auction to sell foreclosed homes by the city didn't work because many were bought by companies and some of those who were bought by people were later foreclosed again because the tax increase was way more than it should have been.
There are a lot of lingering effects well over 50 years since red lining has been illegal.
pheller said:
Or does the system need to be overhauled to just simply make it less of an investment?
This. Homes should not be an investment and making them into one was the root of the problem. This was done through a collective but somewhat unconscious effort over a few generations to limit the supply of housing through zoning restrictions to artificially drive home prices up. These constant home price increases due to artificial causes were seen as a healthy feature of the economy, they called it a "property ladder" and it allowed any boomer or gen. X'er who could buy a house, sit on it for a few years, sell it and repeat to collect hundreds of thousands of dollars just for moving. How nobody asked what this would do to future generations still mystifies and frightens me.
To solve the problem the zoning restrictions will need to be blown wide open allowing for a housing construction boom, especially in low-end housing. Fixing the issue will involve cutting housing values down to a fraction of current numbers, and property/home owners won't be happy about having a big chunk of their net worth lopped off, even if it makes no practical difference to their lives.
GameboyRMH said:1. X'er who could buy a house, sit on it for a few years, sell it and repeat to collect hundreds of thousands of dollars just for moving.
2. property/home owners won't be happy about having a big chunk of their net worth lopped off
1. Why wouldn't the house they're moving to have gone up an equal amount?
2. As a late stage boomer (1964) I wouldn't be mad...my house is my house whether its sale would bring in 0.75 million or 1.50 million. Who cares, even in terms of inheritance my daughters are getting a nice house to live in or to trade for some other nice house.
The people that would get hurt are those that want to downsize to cash out some equity to fund retirement...those will be the victims of increasing supply to reduce cost.
In reply to mtn :
I hear you.
In 2018 I got 0% raise.
In 2019 I got 0% raise.
In 2020 I got 0% raise.
In 2021 I got 4% raise.
In 2022 I got 0% raise.
Total: 4%
Inflation during the same period: 18.2%. (Add some changes to the tax code which are costing me an additional 10.5%)
HOWEVER, I have changed absolutely nothing about how I work. I do my best, and have never intentionally done less than I was able to.
That's not a concept I will ever be able to relate to.
In reply to SV reX :
Yep, I've made the biggest 401K contribution allowed by law each year for as long as I can remember.
The limit is being increased $3,000 next year ($27,000 in 2022 to 30,000 in 2023) for those 50+ that are allowed the extra "catch-up" contribution but I'm sitting tight at $27,000 in 2023.
My typical annual increases are far short of our 8.3% inflation rate (official number - real cost of living is up significantly more) and I'm feeling it. I also have a side hustle and its revenue is off 40% from pre-COVID levels all while my operational cost are up around fifty percent mostly due to gas prices.
If I'm a proxy for many others, the stock market is about to see a big headwind in 2023 as cash inflow levels to various retirement accounts disappoint due to people having to pull back on investing.
In reply to SV reX :
Can you understand that others question what they are doing? This isn't supposed to be working for the honor of working, it's supposed to be working to help me and my family live. If you want to give more and get less, that's your option, but don't criticize people who would like to get more when they do more- especially when you see the people who just make decisions making a LOT more.
That's why you have problems with hiring well after COVID relief programs ended.
It's pretty insane to me that you see some of the wealthiest people in the world complain that they can't make more money because their employees would like to have their own lives.
I'm in the San Francisco bay area where there's a serious homeless problem. The irony is that there's tons of empty housing units. Practically every community is beating the drum that we need more housing, but for the most part what gets built isn't cheap. Yet they're building apartments at a breakneck pace, so I have to wonder if we are on our way to a housing glut - alongside a homeless crisis. It's crazy.
In reply to alfadriver :
You are loading an awful lot of inaccuracy into that.
I have never once criticized anyone for wanting to get more when they do more. Of course I can understand it. I just disagree with it.
And no, it has absolutely nothing to do with hiring post COVID. I don't do hiring. I'm just reflecting industry wide trends.
In reply to alfadriver :
Also...
There is a huge difference between wanting to get more when you do more, vs doing less because you feel like you should get more.
I agreed to do a job. I do it. Period.
If I am discontent, I approach my employer directly and discuss, or I look for employment elsewhere. I don't do less work than I agreed to.
But that's just me.
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